Personal Finance: Students in 'Mad City' learn fiscal wisdom

Jessica, 16, is a librarian with a police dispatcher husband, a toddler, a $1,700 past-due credit card bill and $4,500 in monthly income.

Mesa Verde students compare their efforts during a Mad City Money financial education session.
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Nathaniel Roesky, a 17-year-old junior at Mesa Verde High School, adds up his purchases during a session of Mad City Money, a role-playing game that demonstrates the consequences of good and bad financial decisions.
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Volunteer Richard Petite offers junior Sarah Whitaker a range of vehicle options on which to spend her "income."
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Raquel Neeley, left, and Bobby Byer, right, both 16, grapple with a personal finance program that gave 35 Mesa Verde High School students a firsthand look at the adult world of bills and budgets. Students used a paper debit card as they made spending choices, from cars to clothes to day care.
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Claudia Buck

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By Claudia Buck - cbuck@sacbee.com

Jessica, 16, is a librarian with a police dispatcher husband, a toddler, a $1,700 past-due credit card bill and $4,500 in monthly income.

Matthew, 17, is a married teacher. He and his truck-driver spouse make $4,400 a month, have one kid, a monthly $100 student loan payment and $246 in total credit card debt.

Both couples pay $150 a month for medical coverage. How do they make ends meet each month?

Welcome to "Mad City Money," a personal finance exercise in which high school students are given a pretend job, a paycheck, a spouse (or not), maybe a couple of kids and a small pile of debt. Their task: figure out if they can afford the lifestyle they desire.

For 35 Mesa Verde High School students last week, it was a firsthand look at the adult world of bills, budgets and whether their paychecks will cover a three-bedroom house, designer clothes and a Mercedes in the garage.

For three hours, they were given a paper debit card and set free to crisscross the school gym, stopping at eight stations to make lifestyle choices – from cars to clothes to day care to whether to buy or rent a home.

"It's a safe environment to make mistakes," said Shannon Heaps, financial literacy coordinator for SAFE Credit Union, which sponsored the Mad Money event. "If they buy a big, new car, they might not be able to buy (designer clothes)."

Heaps, who has organized similar events at other Sacramento high schools, said: "They're not going to lean from someone giving them a lecture: 'You've gotta save your money.' This is hands-on and it lets (teens) learn from their mistakes."

At every stop, the students – mostly juniors and seniors – had to make multiple, often tempting choices: the new SUV or the used sedan. Weekly fast-food trips or $40 dinners out. Even whether to spend $12 – or $80 – a month on takeout coffee.

Each had a paper debit card used to "pay" for their monthly lifestyle picks. Adding to the mix, an adult "fate fairy" circulated, handing out slips with unexpected good or bad news: a $300 flat tire repair, a $100 grocery giveaway.

The ultimate goal: To wind up with no more than $100 in their checking accounts. Anything beyond that was assigned to long-term savings or paying down debts.

The event was put together by the Citrus Heights school's business academy, which includes three student-run businesses: a campus store (the Mavericks Mini-Mall), a recycling center and a SAFE Credit Union branch. In addition, the academy's students are required to complete unpaid "work experience" jobs at local businesses, such as pet hospitals, bakeries, restaurants and insurance companies.

"We're doing a disservice if we do not teach them personal finance," said Karla Branen, a business academy teacher at Mesa Verde. "Starting their senior year, they're going to be bombarded with financial decisions, like pre-approved credit card applications. If they don't know the realities, they can get themselves in serious trouble."

The adults working the stations (Really Realty, Mad City Mall, Gotta Eat!, etc.) were told to "upsell" the teens, trying to coax them into higher-priced products, just as the teens might encounter with any salesperson in the real world.

"It's really their first exposure to expenses as an adult," said Price Johnson, a SAFE personal banker, who did his best at the "My Closet" table to entice the teens into selecting designer duds and expensive haircuts and personal product choices. The monthly options ranged from $34 per person (used clothes and $7 haircuts) to $390 (luxury labels and high-end hair products).

"When you walk into an Express store, they're not going to ask 'What's your budget?' " said Price. "They're saying, 'Check out this sale on our highest-priced new jeans and dress shirts.' "

Some instinctively knew what to do. Matthew Thompson, the supposed teacher with the truck-driving wife, said his first stop was the credit union table, where he paid off his $246 credit card bill. Why?

"It's something my parents drilled into me: 'If you have debt, pay it off and get rid of it soon.' So that's what I did," he said.

For his fictional family, Thompson also chose a used sedan for his wife, a bus pass to get to his teaching job, a $150 family clothes budget and just one or two fast-food meals a month.

His plan: Save the "mall" stop for last. "If I have anything left over, I can go wild."

About two hours in, the financial realities were starting to sink in. Some teens were already $600 or more in the hole on their monthly budget.

Jessica Campos, the "librarian," huddled with a girlfriend, assessing how they'd both wound up financially upside down.

"Now I'm finally understanding what my parents are always saying: 'You have to decide if you really want it,' " said Campos, a Mesa Verde junior.

The alternatives? Give up the high-end clothes, downsize to a smaller house, switch to a used car.

And just like in real life, there was a cost to every choice. Trade in the SUV? $100 to return it. Downsize from the high-end, three-bedroom-and-den house? That'll be $100. Even a $75 gym membership had a $20 return fee.

"It's not easy," said Derek Kent, 17, who was discovering that life as a TV broadcast technician with a working wife and a 9-month-old wasn't adding up, even on their combined $3,800 monthly salaries.

Hit with an unexpected house fire that "cost" him $250, he was already in debt before he'd even paid for everything on his budget, including day care.

His takeaway: "To live nice, it's gonna cost a lot of money, especially if you have a kid."

Events like Mad City Money, created by the Credit Union National Association, are designed to help students learn those hard lessons before they leave home.

"There's been a proliferation of these role-playing games. It's part of a change in financial education," said Karen Anderson, chair of the California JumpStart Coalition, an association of groups that provide financial literacy programs for K-12 students.

She said a number of organizations – Junior Achievement, banks and credit unions, the California Council on Economic Education, for example – are using these types of role-playing tools to engage teens.

World Cup Soccer and the National Football League team up with Visa to offer money-minded video games. Other finance games: "Road Trip to Savings" and "Ed's Bank." www.practicalmoneyskills.com

The Mint

Money advice for all ages, includes how-tos for parents on talking money with kids, ages 2 to 22. Co-sponsored by Northwestern Mutual Foundation and the National Council on Economic Education. www.themint.org

Department of Education

The California site links to more than 40 free money programs for teachers, parents and students, grades K-12. www.cde.ca.gov (Search for "Financial Literacy")

More games

The Journal of Extension lists other financial simulation games: www.joe.org (search for "games").

Editor's note: In a resource box on page D5 with Claudia Buck's personal finance column on Sunday (Jan. 13), the wrong sponsor was listed for a "Reality Check" website for teens. There are two "Reality Check" websites: www.californiarealitycheck.org, sponsored by the California Career Resource Network, and http://jumpstart.org/reality-check.html, sponsored by the national JumpStart Coalition for Personal Financial Literacy